Aon (AON) 29 Apr 222022 Q1 Earnings call transcript

Good morning and thank you for holding. Welcome to Aon plc's First Quarter 2022 Conference Call. [Operator Instructions] I would also like to remind all parties that this call is being recorded. If anyone has an objection, you may disconnect at this time. It is important to note that some of the comments in today's call may constitute certain statements that are forward-looking in nature as defined by the Private Securities Reform Act of 1995. to to and results differ anticipated. subject cause that or are results actual materially statements certain uncertainties risks could those Such from historical concerning website. XXXX results differences well as cause press Information posted covering as that on been in our release quarter described the such first our having factors risk are could

Case, Aon plc. Now it turn to of pleasure the call CEO is my over to Greg

CFO; by and our and Andersen, first Welcome quarter Christa good Davies, I'm call. you our Thank President. to joined Eric our morning, conference everyone.

As quarters, our leadership, of remarkable They previous the start we in firm. financial posted exhibit work presentation website. by supporting a clients on our tremendous to the to detailed colleagues in across We'd a like continue environment. acknowledging challenging

thank our facing challenges colleagues support of tragic who including our inspiring increasing war the others and a volatility to team, the invites families been Ukraine. adding their of of impacted have by example organizations day, global in and Russian for also every We is their This want to protect support of in communities never In connected property, grow their Asia; and change; availability; chains, capital supply more our to been businesses, their stakeholders impact resilience especially effects helping clients environment, important. and their retirement workforce COVID-XX, this their inflation; readiness. employees, climate continued has and and intellectual

financial to performance. Turning

XX revenue margin year drive and in across a growth. top as a solution to support we strength major an prior Within as we organic Aon EPS adjusted growth and highlight Business This of basis growth, our well with power team from growth demonstrating every Services expansion particular geography Risk, in translated X% and year to would with of the QX Our and platform strong renewals lines, organic delivered XX% our retention. operating to quarter Commercial XX% the X% growth, sustainable of an start excellent points margin, strength increase delivered revenue an X% increase line first adjusted XXXX. performance in

coverage teams X% considers factors. world Our impact sure and inflation make right challenging strength of driven that environment. navigate fully help business hard grew have the In resilience. organic economic continued revenue clients by especially incredibly Health organic as risk in working and retention the in revenue other advisory are new we reflecting grew global complicated to around and benefits Reinsurance and the work, Solutions, Solutions a our around well-being generation clients and core health and strength X%,

quarter. And the would double-digit in And and and compensation We finally, growth as opportunities our we also consumer rewards focus increasingly in in Wealth related flat to revenue saw and and risks strength note our solutions corporate particular growth was we talent, capital. human governance organic on and benefit practices clients Solutions see ESG. ESG

helping clients Our employer challenges. retirement areas investments and investment quarter. the excellent do of team work, in were like pool ongoing address continues development Priority opportunities as our management as well to growth in highlight changes and a plans delegated regulatory

long the uncertainty fully year revenue over mid-single or organic recognizing to digit in increasing greater the global for XXXX we term, Looking full ahead complexity, and continue and expect growth.

to and We XXXX term. over cash year the continue the for also full margin double-digit flow improvement and growth expect long free

efficiency platform highlight service gains. expectations powerful client for increasingly Business of As and organic in driving for that ongoing Services the our quarter reflect the Aon expansion growth is in on and year, combination addition our an the becoming we strong revenue growth would to margin and we tool

transactional property as data of M&A with to enable acceptable strategy. around insights them intellectual priority them discussions value M&A on growth our recent driver great For for created activity. team chemical we Comprehensive a sets value client Services Business multinational example, a game Aon of on how the in with dashboard areas, to where intellectual the them bring example, their we our easily property line. or company, changed our underpenetrated their the client's for us This today interact solution many might for our Business be analytics solutions. powerful Aon liability and ESG, clients topic and in More identify opportunities is by and up and an help substantial us geography opportunities equally clients. supporting opened wide-ranging In innovative work by with including simply, another Services these increasingly

for capital our base with their solutions and their practice stakeholder and risks ESG specializes the in and human business. clients Our assessing prioritizing across opportunities

reinforce Our and their resilience. then improve and specifically monitor mitigation helps the on to of given specific risk tool analytics ESG landscape. this landscape in risks focused quantify Aon strengthen to sustainability, our better geography, drive inform time is which physical to tool D&O solutions. allows capability those And model clients risks their just strategy. climate people we're and culture environmental on to assessment The change solutions risk, The is innovative navigate Insight, their climate clients' risk cyber to our industry not or competitive their climate proprietary business, assets, and priorities experts client risk, on using key power the in links real of developing impacts and

Scaling and our formidable transparently capability better Tyche's with reinforces our simulations, sheet. that especially in we our firm, colleagues sheet brings the enabling and clients help us where strengthen scale with strategy solutions company, our This the welcome inform example, broader with a these tools U.K.-based The and capabilities. clients and expertise including it's complex express an we of broad us built modeling analytical capital advise across to offering latest reinsurance and clients our Tyche both to intent requirements. our reinforce differentiator and actuarial which In enhance to the the scale in risk reserving bring our is year. the full complex in to to model we're to colleagues our help technology balance and execute to across the Aon. acquisitions announced regulatory actuarial and to helps goals by ways enhancing of acquisition evolving quarter us analytics meet enable their speed modeling and well ability to metrics new of capability, clients advise and ongoing the understand teams our a risk they’ve strong continued capabilities. While recently them summary, momentum delighted and our management, In of distribution risk deliver to insurance to position first new commercial it industry better the software returns. over will allows platform in also clients, our ultimately, Tyche, our results growth, base economic pricing, enhances of and on balance key connect meet

Aon ability strategy While shareholders. we the become our and our built gives both continue kinds all in that Services relevant. society platform on our continue this capability volatility clients, Business United relations we've to confidence will in anticipate further The and record us for of value impact and to grow, more environment, our track and drive to its colleagues,

turn over Now her I'd long-term performance for and our on like Christa to thoughts to call the outlook.

much, so Thanks Greg, everyone. morning, and good

operational organic building expansion of start share. highlighted per into of earnings Greg first basis As this translated XXXX. and we to growth and strong X% revenue look We margin highlighted, the quarter delivered to rest financial points XX performance that by forward the growth year, on the double-digit momentum in in a through

dollar euro-denominated was business the ongoing and by first, I quarter, seasonally on revenue unfavorable organic weaker X% new growth euro total as net reflect impact just is that would X% I revenues. a driven by strong versus for retention growth FX includes revenue As from quarter primarily changes generation. of our in an the note driven largest QX

drivers such the Ukraine, As our GDP and there's we rest COVID-related our such GDP, our a in as look asset interest impacts the note rates. driven forecast XXXX, business. interrelated would the of to the employment levels. various by restrictions, year we're revenue and which for and all ongoing of rates, On including correlation inflation growth, drivers the In of particular, rising values, GDP, increases revenues and clients a few seen expected decreases we've of impacts. macroeconomic continuing to GDP, We've the interest corporate monitor in noted as factors, war GDP impact growth underlying and underlying recently factors in between I global inflation particularly

previously, the uncertainty as portfolio. across health our clients resilient. the from portions care impact ways inflation, base. An and tend many of which underlying discretionary to As to exposures in help circumstances project-related GDP trends. portions as On can Greg in economic terms business, see we revenue volatility. we've would increased instance, more On shovel I business values very or of work expense our QX. such there increases property These and we're base were Though, is revenue in overall seeing of across communicated in our increased impacts challenging in our our for also costs. inflation business, we strong mentioned, revenue, are note

our mentioned, priority increase And appropriately goal we're although overall very ongoing Aon expansion. drive Greg our This to continuing their and colleagues are values they're of As expenses, with these risk. invest support areas. cost protected hiring against especially working On to total and in increasing optimizing ensure we're growth, in play. rates. positioned generally, takes and on to are margin well efficiency interest there in compensation higher and clients support operations for at rates, costs, puts Services are But interest of our Business strategy we does continues

often is impacted business on how highlight some of dependent main investment interest be areas may on points rising behavior, in benefit transaction X liability client rates, and from higher by rates. like While revenue interest which I would our construction we

short-term interest investment First, income rise. increases we see as rates

and short-term basis and rate, Over federal of as the revenue in ECB income. million XXX point total $XX the operating interest of to the facility course deposit a an about impact in year, rates, plus translates increase rate U.S. such

pension in to interest rates our discount Second, used value obligations. as result in our higher rates liability improved pension increases

an X.X%. term of is with average fixed rate Third, rate our debt all

strategy So with economic does our business ability the in our is gives not any deliver term interest Overall, expense and resilient, United debt confidence increase. to results our our Aon scenario. in existing us associated

increased greater continue and we long term. over external volatility; said, XXXX expect organic the growth or revenue do however, Greg we for to As see mid-single-digit

and FX investment growth, performance. Business a delivered We of of to and to strong Services of adjusted platform, Aon of in revenue some Moving XX%, our overcoming growth includes improvement an points, technology and increase margins which operational growth from drive resumption efficiencies T&E. long-term impact with operating basis expense and colleagues by negative driven organic operating XX

previously full about year. the the over margins course communicated, As of think we've we

and year. ongoing continued colleagues expect T&E in throughout the We resumption investment of

cost We double-digit expect growth EPS operating managing record XXXX growth track we of to adjusted deliver income margin strong and discipline of translated investments an as XX% expansion continue ROIC quarter. in for into adjusted We basis. on in long-term our growth the

share second per currency $X.XX million material, noted in earnings per impact in an today's would at an we share unfavorable FX or stable impact approximately the rates, income our quarter approximately quarter. expect in $X.XX was the on If As operating XXXX. $XX approximately of translation of unfavorable decrease of remains

Turning XXXX given our year smallest period historically million, payouts due flow by incentive and flow would to free payments. allocation. decreased that standpoint that prior in from Free and cash flow been to cash results. had higher primarily strong XX% driven has we the quarter to cash compensation our a $XXX incentive seasonally note capital strong primarily compensation financial I growth QX

can before, As lumpy be flow cash quarter-to-quarter. we've communicated free from

free expect full XXXX. deliver double-digit cash continue for to year to flow growth the We

and income free enabled forward, growth, the operating drive Aon to Services. structural cash over uses reduced growth Looking flow of improvements cash Business by by expect term long working capital we driven

outlook believe in cash capital million share on We return highlighted expect free quarter. we're in share repurchases the flow to first at to beyond, and by capital XXXX $XXX our approximately all-time undervalued we of the remain Given growth for allocation. opportunity in continue market even our today for significantly highest strong repurchase highs,

inorganically continue capabilities and to content unmet in we've and to also address as to expect client We Tyche. invest need, done with organically

areas challenges. on Our M&A is our pipeline evolving clients' focused high-priority and bring will to that our growing scalable solutions

continue to on assess capital and in portfolio we manage decisions we've our a past, return-on-capital As allocation said basis. all the

ratings. remain our We current a through of estimate capacity. well-laddered to issued sheet debt liquidity and risk in within $X.X credit of our billion In QX, the we the sheet strength We expected maturity and investment-grade manage be our for balance profile. confident our to ratios leverage turning debt range senior Now balance notes.

quarter creation. As strategy. continue we've EBITDA key add continue year maintaining to the strong current over our position the top delighted shareholder operator, on to to as and in With performance debt by call said first and make United your back In to our take value line we'd be bottom while progress credit our grows drive strength and questions. expect driven evaluate opportunity We investment-grade that, the we'll I'll start ratings. a reflect financial before, our summary, the results of Aon and to metrics to turn

Greenspan today Our Instructions] question Fargo. first [Operator comes with from Elyse Wells

question business. reinsurance first the on My is

X% You Is just X get of next growth. of how deceleration a there guys the color, by what renewals? the you that organic with growth just within guys January a Was you something and few saw timing? quarters. for kind It have think past over hoping where business more the Just saw set we rest to impacted some should little about business the year? is the during bit been just

By see just of space. up on much real enhance. about investment in described call followed what have direct way, reinsurance back years really I that we'll and in think Step and opportunity on is colleagues the extraordinary. last even of sort a the this the over that content we number it's been in capability Tyche our so And that Christa accomplished

So on tremendous of down specifics first capability. we're category. see this quarter, we and really, in And Eric, opportunity. momentum. do X%, momentum the doesn't business doubling reflect continued way, just the great great the opportunity the you strong in By quarter this But think? this, around But sort

quarter would business fantastic And very with for it very a strong the I strong. issuance cat team. bond Greg. had say, We Sure, growth the was listen, in ILS the

cycle. reposition they lot into their with In January renewal of look work the a X clients fact, going portfolio great to as

say they very strong as would but for existing a the a it strong start expectations start insurance to I high work was for continue have year, I them through for really the them. So cycles,

margin the year, that half the in started side, to on of you year. see last up the then continuing And pick back

this get improvement in Do the given we expenses that a think in kind the you back of cadence back year? with we're than margin half Or see bit the easier to first to I just of there positioned related to else is T&E year? need about that that this see the in So comps perhaps little half stronger half? anything of think

for the Elyse. question, Thanks

we grow about and we've own to productivity shift our higher-margin leverage services growth, revenue sort getting expansion portfolio margin growth; margins of basis XXX investments points And by offset mix least. last every higher the So areas; year. margin at and a XXXX. a don't term. full year drivers be guidance course I of continue by basis really continued and of will I we're increased say by I XX years, note from things: would delivered is quarter say But over think and would specific what Those give X,XXX approximately so revenue expansion T&E margins would driven basis points grow points key And margin our the of we of we'll each over X where a business XXX year. in colleagues, to to investment business in XXXX strong long deliver did that expansion the in

And very to we So year that. expansion XXXX, full comparable. do margin for very about expect strong deliver excited we're the it's so a

Our question comes next from Bhullar. Jimmy

if to comment wanted just how think your the changed on I past environment could you few has see the months. operating for Greg, in business you

business ago. I your But The think, it months was outlook few still is tailwind, slowing. how less how economic is it maybe pricing trends a seems on like views but obviously, clear changed than a it's have are?

obviously the of is Well, and on lot I you up question. there the out volatility, no -- overall going complexity which there's doubt showing things in sort doubt terms all no of you There's appreciate consideration, greater Christa there's a we're both emphasized or I take that, growth with, the want XXXX over all do I mid-single-digit when into very to look and term. and that across long described. in confident start

But that the So volatility coming their that talking we'll the uncertainty, think we've if of a business. delivered and momentum than quarter the us we respects, But got in many asking a comparable ever. with manage that. out couple means in was XXXX us growth how just And and XXXX highest the decades, you clients and just in start momentum. are highest the in XXXX, higher about QX to annual great about QX year they of

to think very, of very where very comes of uncertain up it with world. because a are clients sitting So But shows the good where life. feel context day Eric, -- its it really we couple provide about we table the Maybe, in kind day. across examples, I you can to of really a

much all honestly, And a across that in that each resilience, lines. chain, mind work of and would Greg. that are would couple our X pandemic, topics been climate, Sure, very what's with that there's key Yes. I going teams doing for solution the have X engaged are much the supply deal a strong not the day the on But years of like ago, of big on we're on focus. I very say say results the just them the world, in cyber, are clients' risks colleague very also but were ago, today, their today that things years core

feel good those also the clients maybe as a we on talking that the people prospects add I are issues go specific ability merge help for forward. emerging So one work about to growth really would that about comment our other today issues we And and client. do

were thinking just were dozens themes it very whether of what their and making in of it's into about labor they was areas, they out or have expanding building RIMS GDP an new colleague had thinking about were impact inflation them business, costs thinking about meetings. where whether resilience. and inflation, came acquisition, They plant, also clients a investing but growth. across client were GDP about our And So conference, risk the thinking were you, or as or we we political much,

have And them plan real than have has holistic impact does having for that with so it all been clients. that as today us play ability more risk is and they future, think, us their the strategically lets those recognizing heightened to conversation really I for a well sense to historically,

as sort do around in lost? that months. have were high-profile disruption might concerns your I business merger retention about there had it from relatedly, doesn't employee the results. in we're And given last past think how Okay. you expect like but And that of you business seeing if your any just departures could because it's fallout you some year. the the And seem and trended slowdown talk But people over in you and several your of well,

Really quite it. the opposite of

that think fortunate this been we've quarter. I

As for at retention. is last and the And engagement were in quarters, exceptionally we've reported levels number they fact, XX%, attrition we of plus. than better voluntary have high pre-COVID; levels

the So you talent from as standpoint. of and of are as out terms now going where you we come sort And of into XXXX this strong again, the is momentum about a momentum XXXX. know in get

we're content, do this developing for innovation supporting enabling It's in we talent with accelerate with really earlier, have those, here it support real capability, talent, it investing I the for So our a point clients. And also them. now that sure, got of what means supporting in clients. can means, we do it not And that's colleagues, new so to analytics There's them just but are Eric in we've yes, terms about think, investing our advanced technology, our support of evolving, important we're exceptionally types talked in positive. on we colleagues how they and talk.

is critically important. this So

right more colleagues essential. we is in very, And the it's -- positively. driven see Let's we're improvement, Business years. But It invest been cetera. IP IP, drive really to that's say helped we've really through the very has X and margin for come underway XXX that like that, Services surplus innovation, now back described. Aon is where something things in This working got Christa as than created et platform

a a lot us there, spot. and going in So good combination on that very puts very,

great ESG, do where we're add think maybe about could But talent years. as areas is Like colleague because you Greg, the attrition well the business over like. expertise. raised require to really point previous investing a couple I that cyber, I and have the I see are the if next we that these of and engagement -- in just where mentioned question, resilient, going deep climate,

of get making United you we're key to deliver How when it capability experts so they there. we've the talent, or be you do for making bring the like. in that that And us strategy client they once in the investing invest. understand the great to what that need want? opportunity the do with solution the able either a other investments the they service we're through to teams And focusing so the them clients need, there is to the that expertise, employing. today so in the and But we continue working Aon firm, client them right also By substantially been to core in sure way, this to the that or advice together right have our for delivering amount

them. So strategy good are with and about feel the pretty our I we we future talent optimistic and about think where are

Our Meyer Instructions] question [Operator KBW. Shields comes next with from

technical question. One

understand the right organic there's Russian rather terminating Russia in used I suspending that for in if Does it, stopping to I operations now? mean than, discontinued As -- is them. services from office growth an guess, language

minimal There a not clients terms end, in core and lot the support is overall impact. Chris, in process operations, -- but as suspending highlighted going we it's As impact Obviously, business. you it of in very, are really, you on -- perfectly. of covered And our minimal very the

Okay.

in what's strengthened formed what impacting of actually I sort environment that's whether marketplace. for of newly guess, the rapidly But and or I'm seems word the the become, be, asked already. brokerage. question Second right newly wondering competitive there know the reinsurance that a right is, related #X And to want to brokers reinsurance been to now, I don't frenzy

about. before. we're coming It tremendous is see is the on see client addresses really kind formidable commercial it as that together we the way, of and this -- require Eric said with doing what the And The a of team need. opportunity. It's the that side, on That's there. step insurance and marketplace. analytics clients. and insurers, our the we capability We before. we're reinsurance more companies we decade love with in really by receive. as opportunity -- what becoming And it's And capabilities Also we are Tyche reinsurance exactly Listen, isn't what our just back, with in sophisticated side, ago the looked talked a is the we most some do more insurers about for only applicable to what world opportunity there. really

And so for some creating as net-net but opportunity. a just us, of the that stands us climate, it also board what market. not And doing is in doing we it's existing truly tremendous in across today, see a to lot market. new doing competing that tremendous, market, the the market see it you And what market is in IP, we're new new in core work we're of but

have and we're we And increase see content the opportunity the anything as and pie over size you columns have to analytics in we and think with we contributor the big about going the Eric, of time. saying capability the so time. else digit detail? add what greater mid-single place, and through tremendous the over we essentially to that is or we're It's a the

how of being and Greg, we what using for deep well that life from you you're continue the you're with capability, do. hit clients Greg handle a global climate, through to as global do insurer, think reinsurance it's are if thing the the mortality it add, is of pandemic. core clients deal I homeowner's said needs if risks, insurer, insight, these we'll with product, analytical future to only issues do a clients' well: you marketplace, have the would But our think insurance to cyber all critical today a today to lot a Maybe, deal having a I trying having to risk if company the P&C you trying able it

there for are opportunities very the strong. us So

and closely drawing we that to I'm okay. team, so and aligned, cutting-edge The they to not That's make have good the And franchise our investments if very feel we reality surprised continue make capabilities. it's competition. sure is

David from comes question final Our Motemaden.

Greg, spoke I last favorable voluntary could you have quarters, trended levels. head wondering count pre-COVID over compared to had attrition I the levels. But talk if over question. pre-COVID to to new just pre-'XX you X, at the last levels I'm continuing how be adds year about or a guess or few about

we count per about I'll se. observation, offer head an but don't talk

talent. colleague us, and just helping just in port think see developing very how -- about For differently. describe investing content not someone different really better. so They we grow get capability our than opportunity We're organic we literally it's better. And is capability that adding get the They professionally. colleagues a

So again, forward Eric analytics, reinsurance, forward just about analytics. talked are all

no longer about thinking mirror what looking and the You're rearview in there. was

what's about how to happen. You're thinking going you model

capability colleagues. in way to form your of its support And been You our to adding new we've the put in hands the evolving an it in analytics absolutely. we've in organically investment more colleagues of terms powerful, adding that extremely colleagues, and And really do a been is -- that, compete. and way of to

us; led our unique. And platform our about cash a in a us is us; operating to, Services us. free been -- Business really in which just performance, Aon report, has because is it as with the trending of context this It's So clients very, it effectively for more flow, for we trends very next It's record that behalf about how for efficiency, really on colleagues. it's work the top is and line chapter record not with growth, you've positively. record seen

Got it.

didn't in follow-up mentioned a comment Asia-Pac. And helpful. release just it I Commercial Canada, saw U.S., U.K. a press on see the In then EMEA double-digit That's Solutions. Risk and Okay. the question I growth the in

there elaborate just the expectations slowdown wondering could you throughout region. the what like and I'm in looks also in that a growth if how guess there, I So on potential severe how trended given are economy quarter

closer Commercial and I'll How war front us in business take I is very risk it's provide sort home to on a clients' a from Eric. this of certainly, a of like. the for development chain, credit the those and topic EMEA is number opportunity supply a Greg. certainly is political those and would actually end an both Risk business topics. of retention, standpoint, From like our U.K. are mind say, all clients. in It for Sure, new for discussion. value Maybe clients This those them, the to client topics one. Ukraine for had their solid of real quarters

our would right colleagues, lot build a very well-being the are I to there, and EMEA that But colleagues say on need European the they're helps the things on close we of the U.K. they and the to from affected the a in had to the expected 'XX. much strong familiar that work and our other more year clients so of of And go I through they're our think quarter, than so which ultimately we're the very because often is first culture. world heightened it were it. all almost But is is certainly, very parts clients focused doing as personally have clients solid

the Aon forward? Is me Is about It quarter. this there there results I lot. the I to other provide help more power The line income you I has of could And $XX bounced maybe way sure a and think at Aon item forward? just think about I'm one totally when I around going is earnings Great. look if think going of look item, the in. should about was that which how Okay. a sneak I line any through not can million as

in what continued just happened that portfolio quarter was management. there So

model on think line lower-growth, we ROIC would we should But continue as about income Aon, our the ourselves. that we lower-return you revenue portfolio basis. what and business, to divested about continue to And higher-margin revenue And improve So will we investments growth, businesses. we X organically an some other of inorganically as our to and continue performance, lower-revenue driving say you think growth, growth, to higher lower-margin is, portfolio. continue manage portions divest

this what that's saw quarter. you So again in

queue. closing And no There questions now are to further Greg back remarks. Case for in

joining appreciate say to we the next you to want just We for very quarter. thanks I forward call. much, talking look and it, to everyone,

for today's concludes you That Thank conference. all participating.

may disconnect at this You time.